MARKET ENVELOPES

To watch:

EuroCOIN indicator of economic activity in the euro zone; EU PPI; OECD CPI.

Opening call:

Stocks could open lower. The dollar weakens after disappointing employment data. Oil is falling. Gold and metals are on the rise.

Actions:

European stocks are expected to open lower Thursday as investors remain cautious at the head of the US jobs report on Friday.

In the US, the Nasdaq Composite hit a record to start the month, building on its strong August gains.

Stocks rose over the summer on expectations that the economic recovery would allow corporate profits to continue rising. Investors are broadly bullish that stocks will continue to make gains, and Wednesday’s moves continue a historically quiet period for the market. The S&P 500 has not suffered a 5% decline since October and hit more than 50 new highs in 2021.

“Anytime you get even a 1% or 2% pullback, it provides an opportunity to ‘buy the down’” for investors, said Adam Phillips, managing director of EP Wealth Advisors.

Individual investors in particular have crammed the stock market at an all-time high this summer, helping to send stocks to repeated highs. JPMorgan Chase & Co. strategists estimate net inflows into U.S. stocks and exchange-traded funds hit a record high of around $ 16 billion in July, before an additional $ 13 billion poured in in August. .

However, Mr Phillips and other fund managers warn that markets are likely to become more volatile in the fall, signaling catalysts including the reduction of stimulus packages by the Federal Reserve.

“September can be a pretty tough month for risk assets,” said Suzanne Hutchins, Head of Real Return Investments at Newton Investment Management. “The markets are pretty high overall, the valuations are pretty rich.”

Other potential risks on the horizon include the Chinese crackdown on tech companies and the German federal election in September, Ms Hutchins said. At the same time, “there is a lot of cash to find accommodation, which is always quite favorable,” she added.

A private manufacturing gauge in China fell to its lowest level in more than a year, suggesting that the Covid-19 outbreaks led to a decline in activity in August. Investors expect the slowdown will prompt the People’s Bank of China to ease monetary policy to boost growth, said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Forex:

The US dollar weakened following a disappointing jobs report. ADP reported Wednesday that the private sector created 374,000 jobs in August, well below the 600,000 analysts expected and raising concerns that the Delta variant will slow the recovery of the labor market.

The WSJ Dollar Index – which was slightly positive before the release of ADP employment data – is now 0.1% lower. The dollar weakened 0.3% against the euro and strengthened slightly against the yen.

The euro’s current gains could exceed $ 1.19, from $ 1.1842 now, with the prospect of a cut in European Central Bank stimulus measures provided risk sentiment is stable, Saxo said Bank.

ECB members Klaas Knot and Robert Holzmann have called for reducing pandemic bond purchases soon, which is not surprising given their usual stance, but European bond yields have reacted favorably to this development, Saxo Bank forex strategist John Hardy said.

“These moves, despite the rather moribund action of US Treasuries, constitute distinct positive support for the euro.” Meanwhile, the market has started to incorporate higher probabilities that the ECB will hike interest rates in 2025, Hardy said.

Obligations :

Treasury yields traded mixed on Wednesday, after a report on US private sector employment turned weaker than expected. The yield on 10-year Treasuries was 1.301%, compared to 1.303% on Tuesday.

Energy:

Oil fell early in Asian trade due to expectations of weak demand due to outbreaks of Covid-19.

Crude benchmarks edged up slightly overnight after OPEC + ratified its initial plan of incremental monthly increases of 400,000 barrels per day, dropping a U.S. government request to add even more crude in the world market.

But “what is not so certain … is whether demand can grow as quickly as OPEC + and the market anticipates, given the risk of further blockages to tackle the unresolved spread of Covid mutants “said Rystad Energy.

Offshore oil and gas production in the Gulf of Mexico is slowly starting to return after four consecutive days of almost 100% shutdown due to Hurricane Ida.

The Bureau of Safety and Environmental Enforcement reports that 80% of offshore crude oil production, or 1.5 million barrels per day, is still shut down, while 83% of natural gas production remains shut down. Both of these percentages are an improvement from yesterday when 94% of oil production and 95% of gas production were offline.

Metals:

Gold rose in early Asian trading, ahead of the release of the US non-farm wage report, due on Friday. Gold hovered as investors assessed a plethora of US economic data that pointed to good prospects for the economy but hiring problems, Oanda said, adding that the precious metal would likely continue to consolidate until the data. on Friday’s job.

Copper edged down in early Asian trade after Chinese data showed the country’s manufacturing activity contracted for the first time since April, ANZ said.

The bank noted that Caixin’s manufacturing PMI fell to 49.2 in August from 50.3 in July, likely signaling weakening demand for copper. This exacerbates earlier price weakness after China released a combined 150,000 tonnes of copper, aluminum and zinc to the market from its strategic reserves, ANZ said.

The three-month LME copper contract fell 0.1% to $ 9,325.0 / ton.

MAJOR TITLES OF THE DAY

OPEC Alliance maintains gradual increases in production, despite demand from the United States

The Organization of the Petroleum Exporting Countries and a Russian-led producer group have said they agree to continue increasing oil production in measured stages, for now resisting recent US pressure to open more. widely the taps of the group.

In July, the OPEC-Russia alliance pledged to gradually bring back millions of barrels per day of production that it had bottled at the start of the Covid-19 pandemic.

Fed’s Bostic warns surge in evictions could weigh on recovery

Atlanta Federal Reserve Chairman Raphael Bostic said on Wednesday ending eviction protections and a slow rollout of assistance to tenants who owe landlords money could create problems for economic recovery .

“The moratorium on evictions has been very helpful so far in preventing people from being displaced from their homes in the midst of a pandemic,” Bostic said in a virtual appearance, referring to a ban recently lifted eviction that protected tenants in financial difficulty.

China increases loan quota by CNY 300 billion to stabilize growth

China’s State Council has announced that it will increase the central bank’s retrocession quota by 300 billion yuan ($ 46.4 billion) this year to support struggling small businesses and keep economic growth in the economy. a reasonable range.

The cabinet, at its weekly meeting on Wednesday, said it would step up its political support for small businesses that have been squeezed by rising commodity prices. The increase in the on-lending quota means that the central bank can lend more money to Chinese banks which can then be loaned to companies.

Moderna says vaccine contaminant in Japan was stainless steel, sees no safety concerns

TOKYO – The foreign substance detected in some vials of Moderna Inc.’s vaccine in Japan was stainless steel and is not believed to affect the safety or effectiveness of the vaccine, Moderna and its Japanese partner said.

Moderna and Takeda Pharmaceutical Co. reported the first results of their investigation after Japan last week recalled three lots of Moderna vaccine containing a total of 1.63 million doses, citing unspecified contamination.

American factories will continue to buzz

Even if the resurgence of Covid-19 reduces Americans’ penchant for spending, factories are likely to continue to buzz. This assumes, of course, that they can get the parts and the labor.

The Institute for Supply Management said on Wednesday that its manufacturing activity index stood at 59.9 in August, up slightly from 59.5 in July, remaining at a historically high level. Anything over 50 indicates expansion.

SEC sues BitConnect and its founder, alleging massive cryptocurrency scam of investors around the world

WASHINGTON-Regulators on Wednesday sued an offshore company that allegedly carried out one of the biggest cryptocurrency scams ever.

The Securities and Exchange Commission has accused BitConnect and its founder, Satish Kumbhani, of a $ 2 billion fraud that abused bitcoin collected from investors around the world. An American promoter of the scheme, Glenn Arcaro, has pleaded guilty in federal criminal court for his role in hijacking American investors.

SEC plans to seek funding for criteria used to tout sustainability

WASHINGTON-Asset managers who claim to allocate capital to environmentally or socially responsible companies may need to support these claims.

Wall Street’s main regulator is considering requiring fund managers to disclose the criteria and data they use to apply labels such as green, low carbon, or sustainable. Securities and Exchange Commission Chairman Gary Gensler said on Wednesday he has asked his staff to make recommendations regarding new disclosure requirements for these funds and expects to seek public comment on the matter more. late this year or early 2022.

Spike in Covid-19 cases hits Asian factories

HONG KONG-Factory activity weakened across Asia in August, with a resurgence of Covid-19 infections adding to global supply chain disruptions and confirming fears of a slowing recovery economy of the region.

(MORE FOLLOWING) Dow Jones Newswires

09-02-21 0010ET


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